Market-specific Sunk Export Costs: The Impact of Learning and Spillovers

Abstract

Firms may face sunk costs when entering an export market. Previous studies have focused on global or country-specific sunk export costs. This study analyses the importance of market-specific sunk export costs (defining ‘market’ as a product-country combination). We also study how market-specific export costs can be affected by various kinds of learning and spillover effects. We use firm-level panel data for Norwegian seafood exports distributed on products and countries. The results lend support to the hypothesis of market-specific sunk costs. We also find evidence of learning and spillover effects, particularly within the same product group.